Tesla Motors Is Overtaking Nissan in EVs

The product plays an important role in the performance of any company. This holds true for Tesla Motors (TSLA) as well. The electric vehicle (EV) company has made rapid progress in terms of sales in the past few years, and this clearly reflects on Tesla's revenue performance in the past few years.

However, the journey has not been easy, as Tesla Motors had to face competition from an established car maker in the form of Nissan (NSANY) just a year after it launched the Roadster in 2008.

Nissan had launched the LEAF in August 2009, and the car went on to become a sales success, gaining the tag of the world's "best-selling highway-capable all-electric car ever." Driven by Nissan's worldwide presence and its deep pockets, the company overtook Tesla in terms of sales.

Though Tesla's Model S and the Nissan LEAF cannot be considered to be direct rivals due to their price and feature differences, the LEAF does provide a gauge of Tesla's growth.

Moreover, recent developments indicate that Nissan is conceding its EV crown to Tesla, which is good news for the latter as despite its high price, buyers seem to be gravitating toward the Model S. In this article, we will take a closer look at why Tesla is positioned to overtake Nissan's LEAF as the king of the EV segment going forward.

Tesla is now overtaking the LEAF

After close to 6 years, Nissan is still banking upon the same model to tap the EV market with periodic updates. On the other hand, Tesla had launched the Model S in 2012 itself, and is expected to launch the Model X and the Model 3 soon.

In the past few years, Nissan's worldwide dealership presence and resources helped it beat Tesla Motors' sales figures. As we compare the yearly sales figures of both cars for the last 3 years, we find that the Nissan LEAF has been leading all the way. In fact, the LEAF is the most sold electric car till now at over 170,000 units, while Tesla’s total has reached only 66,000 units of cumulative sales.

But, coming to 2015, we can observe a turnaround. In the 5 months of 2015, Tesla's Model S has been the bestselling EV in the U.S. Although the Model S is a luxury car targeted at early adopters and not the masses, it has gained strong recognition from the public as a comprehensive electric car.

This is despite the fact that the LEAF is way cheaper than the Model S. But, it looks like customers are now recognizing the fact that paying a premium for the Model S is worthwhile due to the features that it comes with.

Now, the Model S is way superior to the LEAF in most of the features that drive sales. The Model S has a much more powerful battery and a motor that result in a power to weight ratio of 0.064 kW/lb, which is 2.5 times more than that of Nissan. This indicates the ability of Model S to operate easily at full load.

Range is one of the top priorities in any customer's mind before buying an electric car. The Model S' range is also miles ahead of Nissan LEAF. This single drawback can put LEAF out of the race once Tesla is able to reduce the price further.

Looking at the price of the two vehicles, one can easily make out the reason why Nissan has been able to sell so many LEAFs so quickly in the past years. But, going forward, Tesla might be able to reduce prices as it is making strategic moves in terms of developing advanced battery technology to drive down costs. Additionally, Tesla is ready to launch a new model, known as the Model 3, at almost half the price of a Model S. Thus, with this model, Tesla will be able to continue overtaking the Nissan LEAF going forward in terms of sales.

Why Tesla could continue extending its lead over Nissan

Tesla is fully focused on changing the meaning of road transit. It has already got its next two models (Model X and Model 3) ready to be launched over the next two years. Tesla has already started operations in China and Japan last year, and the Model 3 will be the first Tesla car planned to be launched in India.

Tesla is also trying hard to develop the required infrastructure of supercharging stations, while trying to develop the market at home, in Europe, as well as in Asia. Further, the company is developing battery technology and will manufacture batteries in house soon.

At the same time, Nissan is still running its age-old model, which is probably nearing the end of its product life cycle. Nissan has neither launched nor announced any new electric car as of now. All that is being said is that they will come up with the next generation LEAF around 2017 or 2018. Thus, it is likely that Tesla will gradually continue overtaking the LEAF's sales and establish its position as the leading electric car maker globally.

Investment Implications

The investment implications of Tesla's improving performance over the Nissan LEAF is not hard to judge. As we saw above, Tesla is increasing its lead over the LEAF this year in the U.S. Now, the Nissan LEAF commanded 30% of the U.S. electric vehicle market in the U.S. last year, excluding Tesla's sales. In fact, in December 2014, the LEAF accounted for 38% of all EV sales in the U.S.

In 2014, the LEAF sold 30,200 units in the U.S. In comparison, it is estimated that Tesla shipped around 19,000 cars to the U.S. and sold 17,300 units as mentioned earlier in the article. Now, as Tesla is selling more units than the Nissan LEAF this year, it is likely that its sales in 2015 in the U.S. itself will be way better than last year. For instance, as mentioned earlier, Tesla has sold 8,800 units in the U.S. in the first five months.

By extrapolating this data for the full year, it can be expected that Tesla Motors will sell just above 21,000 units this year, while the LEAF will sell 18,580 units based on its performance in the first five months. Thus, it is likely that Tesla will eat into the LEAF's sales this year.

Moreover, this will have a positive impact on Tesla's revenue. Assuming that the company sells the base versions of its Model S that's priced at $71,000, its revenue from the U.S. will increase by $260 million in 2015.

Hence, Tesla's increasing lead over the LEAF will lead to an improvement in its financial performance as well. Moreover, as the company explores other markets such as China, it should be able to enhance its performance further. Thus, Tesla Motors' lead over the LEAF is an indicator of the adoption of the Model S despite its premium pricing, and this bodes well for investors in the long run.